Staff underpayment impacting businesses too

There have been a number of high-profile examples come to light of workers being underpaid, but what is less well-publicised is the effect this has on other businesses doing the right thing.

While workers have been justifiably up in arms at being underpaid in their entitlements, businesses competing against such firms – particularly SMEs – are also losing out, as their attempts to do the right thing and pay their workers appropriately impact on their ability to remain price-competitive.

“It’s like it’s the Wild West; it really is a terrible situation,” says Amajjika Kumara, co-owner of high-end salon Lily Jackson Hair & Makeup.

“Salons are able to operate at the lower end of the market because they’re not paying their staff award wages. That is the industrial instrument that we are legally bound to pay our staff with. They can only afford to charge $40 for a haircut because they’re underpaying their staff.”

She cites a recent example of a government audit which has found one particular salon underpaid its staff to the tune of around $300,000.

“How do you come back from that? It’s no different to the 7-Eleven debacle, you know, a couple of years ago. People are paying cash. When we talk to people as well, it’s like the individuals themselves, the employees they’re putting up with – I don’t know why – they put up with substandard conditions. Working through lunch, they don't actually have a contract; there’s no super that’s being paid,” says Amajjika.

While she welcomes action by Fair Work Australia to try and eradicate underpayment of worker entitlements, Amajjika questions the effect this will actually have on the industry as a whole – as well as all the other industries under the watchful eye of the regulator.

“We actually see the Fair Work audit as a really good thing, but at 1,600 salons [nationally], I don’t know whether it’s going to change anything.”

Amajjika’s business partner Jules Peacock suggests that business owners struggling to make ends meet under the weight of staff wages go back to the drawing board on their entire business plan and customer offering.

“The first thing they need to do is do a cost analysis on their business and look at what they’re charging and what they’re making, and what their expenses are,” she suggests.

“I think there’s a lot of salons that will just open without any kind of cash flow projection running in their business. They’re just looking at the salon next door and going, ‘Oh, they’re charging $25 for a haircut, all the clients are going to go there. What do I do? I’ll meet that because I don’t want my clients going next door’.

“Become better, be different, stand on your own two feet, going ‘This is who we are. This is what we’re doing’. Get some values in your business. Look at the staff you need, look at the staff you don’t need and make some really tough decisions.”

Amajjika adds: “[Ask yourself realistically,] ‘Are you worth more money?’ If you’re not worth more money, get education and make sure you’re understanding your real worth!”

Hear more insights from Jules and Amajjika on their experience with staff training and recruitment, the 457 visas debacle and more on the My Business Podcast below:

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